Factors Affecting Credit Default Risks For Rural Savings and Credits Cooperative Societies (SACCOS) in Tanzania

Abstract

This study was done to assess factors affecting loans’ default risks or loans repayment performance for the Savings and Credits Cooperative Societies (SACCOS) in Tanzania. The study used qualitative, descriptive and multivariate regressions analysis to assess factors affecting credit default risks for 431 borrowers from 37 SACCOS in Morogoro, Dodoma and Kilimanjaro regions. The study reveals that loan size and years of schooling of borrowers contributed positively to the loan default. However, the study finds that other independent variables such as loan activity, marital status, age, family size, interest, loan duration, value of collateral and borrowers’ experiences unfit the regression model. Other factors such as political interference, lack of entrepreneurship and investment analysis skills, embezzlement practiced by leaders and SACCOS’ staff, drought, diseases, deaths and other calamities, non performance of the business, inadequate loans follow-up and lack of loan activities’ insurances cover were mentioned to affect the loans default. The study noticed that absence of proper credit risks management techniques resulted into huge amount of overdue loans. This study recommends that politics should not be entertained in the SACCOS activities and SACCOS should make sure that they abide by their regulations. Also SACCOS’ management and members should be trained on investment and business analysis, at the same time the loans limit should be considered. We strongly recommend that insurance cover on the crop, livestock and other products should be introduced for SACCOS operating in rural areas while the government should continue to monitor and supervise the rural SACCOS in Tanzania.

Keywords: Factors, Credits default risks, Rural Savings and Credits Cooperative Societies, Tanzania